National Letter Of Indenture: Why College Athletes Are Similar to Indentured Servants Of Colonial Times

By Jason Belzer, Andy Schwarz

22 min read

It is part of the mythos of college sports; young men and women enter our nation’s universities as “student-athletes” and, after their playing careers have ended, they graduate and go on to great, successful lives. For many, the belief in the transformative power of an athletic scholarship is a true faith. Yet for a significant number of college athletes, particularly in the sports of basketball and football, the compensation they receive in the form of a free education does little to steer them off a path in which they achieve far less than their more accomplished teammates.

Like many of today’s college athletes, Daniel Dulany, a Queens native, came from family of modest means. His father had recently run into financial troubles, so Daniel was forced to transfer from an expensive private school. The free ride he received to Maryland was a blessing for his family. Daniel had always aspired to be an attorney, and promised himself that he would work hard and eventually get into law school.

John Noblin, on the other hand, was a Norfolk native and grew up a Cavalier at heart. A young man from a family of little means, the prospect of four years in Virginia with the opportunity to practice his craft, and a free education along with room and board was a dream come true. Sure, the days would be long, especially during the summer grind preparing for the fall season, but he would take to the field in search of glory.

Dulany finished in three years, and went to work for George Platter II, a successful lawyer. He traveled to London and upon finishing law school, returned to Maryland and was admitted to the bar. He became a prominent attorney in Annapolis, and later a major land developer.

Hard work and a dream do not guarantee success. Noblin was not as fortunate as Dulany, and eventually entered the construction business. Maybe Noblin was not to blame for his lack of success; maybe it was the fault of his agent, David Warren, for getting him a raw deal in the first place. Whatever the reason, Noblin would become just another statistic in a system where unpaid labor was exchanged for the promise of success that often was out of reach.

Among today’s college athletes, for every Daniel Dulany there are many John Noblins. Yet, for all the similarities, neither John nor Daniel ever played college sports. In fact, when Dulany immigrated from Queens County, Ireland in 1703 and Noblin from Norfolk, England in 1655, it would be more than a hundred years before the University of Virginia or Maryland would be established.

Both Dulany and Noblin came to Colonial America as indentured servants, part of a system for recruiting labor to America that flourished in the Mid-Atlantic colonies of Virginia, Maryland, and Pennsylvania. Indentured servitude was vital to the immigration of Europeans to the English colonies; according to Prof. Farley Grubb, by the late 1700s, more than half of all immigrants arriving in Philadelphia were indentured in some form. Indenture was a term for a contract – one which bound the worker to a specific master for a fixed term. Indentured servants were promised free passage across the Atlantic, room and board, and often a chance to get an education or learn a trade as long as they fulfilled their contracts and served their masters without pay for four years or so. Dulany was one of the few fortunate ones who built a notably prosperous career out of the hundreds of thousands of indentured servants who came to this land with the hopes of creating a better life for themselves and their families.

Indentured servants typically lacked the resources to pay their way to a better world and thus faced a hard bargain – stay behind in their old lives with little prospect of advancement or else spend several years working only for room and board and training in the hope of bettering themselves. Some purchased passage by signing themselves into indenture in Europe; their shippers would then sell and assign their contract to a master in the colonies. As the market evolved, however, it became more common for the servants to choose their own master once they reached the colonies, negotiating the best terms they could, including the length of service and whether families could stay together. On average, in exchange for passage across the Atlantic, Grubb has shown that a male indentured servant arriving in Philadelphia in the mid-18th century could expect to give up 4.4 years of his life working without compensation other than room, board and a chance to hone his craft, much as the typical college athlete can expect to spend 4 or 5 years earning money for his school but paid only in room, board, and tuition and coaching.

Just as the prospects of an average college athlete having a successful professional career are quite small, the chances that an indentured servant would rise to a position of true prosperity or fame were also few and far between.

The system of indentured servitude arose to solve an economic problem – workers in Europe could not afford passage to the colonies of North America, and merchants and farmers in the colonies needed labor. Indentures allowed workers to buy their passage on credit, promising multiple years of labor in exchange for passage to America. Indentured servants earned less than equivalent free laborers, forced to choose between languishing at home or selling themselves at a discount into a system in which masters extracted a portion of their value in exchange for their “free” ride.

Modern day college athletes, operating in a system eerily similar to that in which Dulany and Noblin served, face similar challenges — low prospects of turning professional in their sports after their college careers are over and a system in which a good deal of their value is transferred to others.

Before proclaiming that college athletics is a modern-day form of indentured servitude, it is important to note several important differences. In key respects, college athletes face a more daunting economic reality. Professor David Galenson has shown that would-be indentured servants actually operated in a vigorously competitive market; the more talented the servant, the better the terms he (or she) could demand, in terms of a reduced length of service or a larger payment (known as “freedom dues”) after the completion of the indenture. Servants also negotiated whether they would receive guaranteed training in a trade and whether education would be provided.

In contrast, athletes heading into college face a solid cartel. In economic terms, a cartel is simply an agreement among otherwise independent businesses (in this case the colleges and universities that make up the NCAA) to fix prices – here it is the price offered for athletes’ services, with NCAA members agreeing that no school will offer more compensation than room, board, tuition, fees, and required books and supplies, so there is no direct economic competition. When a cartel consists of virtually all sellers in an industry, it forms a monopoly, but when it consists of all buyers in an industry, economists call it a monopsony (from the Greek for single buyer) and as the Seventh Circuit recently stated, the NCAA has formed a “clear monopsony” because “the NCAA is the only purchaser of student athletic labor.”

Although in almost any other industry, such a cartel, operating out in the open, would be a per se violation of the antitrust laws, no one has directly challenged the NCAA front-and-center on whether this aspect of the cartel is illegal. In 1984, in a case known as Board of Regents, the Supreme Court found that the NCAA was an illegal cartel with respects to its efforts to limit how much college football could be shown on television. But the NCAA now argues that in the same case, the Supreme Court blessed its current price fixing via dicta (that is, side commentary unrelated to the actual holding in a case). Because of this cartel, and unlike their skilled counterparts in the days of indentured servants, college athletes cannot receive a cash inducement to sign up or the promise of a cash payment upon completion of their term.

When, after settling litigation (White v. NCAA) on the issue in 2006 and with the media questioning why so-called “full ride” scholarships don’t actually cover the full cost of attending college, the NCAA board of directors sought to allow (but not require) schools to offer their most valued recruits an annual cash payment up to $2,000, the overwhelming majority of the cartel’s members voted to forbid such a practice. So on this key dimension, the absence of competition for college athletes, these athletes are in a much worse position, financially, than their counterparts in the days of indentured servants.

In many ways the contracts which indentured servants signed before leaving England for the colonies could be seen as a de facto “letter of intent,” similar to the ones college athletes sign when they commit to play sports at a particular school. Yet unlike today, the colonial system evolved so that once indentured servants arrived in the new world, they usually had up to 30 days for their contracts to be bought out by a family member, friend, or someone willing to give an advance in order to hire them for their services. The professional baseball world is similar; when a high school player is drafted before college, he can choose to go play professional or enter college with the hopes being redrafted at some later point in time. Of course, this luxury exists because there is a free market alternative in the MLB, which is willing to put a value on players before they enter college. College football and basketball lack a competitive alternative for recruits.

Though differing in degree, the punishment laid on indentured servants for attempting to get out of their contracts shares much in common with NCAA rules that penalize college athletes if they want to transfer to a different institution. NCAA bylaws require athletes who transfer to a member institution on the same divisional level to complete a full year of residency before becoming eligible to play at the new school. Professor Richard Hofstadter writes that penalties for servants who breached their contracts ranged from extending their contracts by double the time the master lost while they were gone to as much a ten-to-one penalty authorized in Maryland at one time. Both systems saw extending the period of indenture as the best punishment for those seeking mobility.

To the extent college sports has an interest in preventing athletes from changing teams on a (say) weekly basis, nevertheless rules requiring college athletes to sit for a year when transferring to another institution goes far beyond any legitimate concern, and school and league policies totally prohibiting the transfer to a conference foe or school rival make clear these rules are designed for the benefit of schools, not to preserve the legitimacy of the sport. For the majority of college athletes, such policies do nothing but force them to spend extra time in school when they would be better served graduating on-time or pursuing their professional careers. And the issue affects a substantial portion of college athletes: according to USA Today, transfer rates amongst Division I men’s basketball players are as high as 10.9%, and up to 40% of all such players won’t be playing for their initial teams by their junior year because they transferred, dropped out, or moved on from the sport completely.

Although indentured servants had many more freedoms than slaves, Galenson shows they were still considered “chattel,” that is possessions of their master, and the contracts by which they were bound could be bought and sold at will. Much to the chagrin of the servant, the individual he committed to serve upon his arrival to the colonies could send him off on a whim to much less favorable circumstances. In this respect, the unfortunate reality that servants faced was far worse than, but not entirely different from, the rules that governed scholarship length from 1973 to 2011.

Prior to late 2011, NCAA institutions could only grant scholarships to college athletes on a one-year basis, renewable or cancellable entirely at the coach’s or school’s discretion. Under this system coaches could get rid of an athlete who did not fit into their system or who was not developing as quickly as hoped. As an all-too-typical example, when new SMU head men’s basketball coach Larry Brown took over the program this spring, he cut several players from the existing team roster, telling one of them “[he] wasn’t good enough to play for him.”. Unlike their athletes (who still face a transferring penalty for breaching their letter-of-intent if their coach leaves), coaches have no waiting period when switching schools and until this change in the length of a scholarship, schools had no waiting period to replace a player dismissed under a non-renewed scholarship.

Despite operating under by-laws which purport to be focused on the welfare of college athletes, when the NCAA held a vote to allow (but not to require) schools to offer four- or five-year scholarships, 205 of 330 Division I institutions voted against the new rule and the measure passed by the narrowest of margins, as a supermajority of 207 schools was needed to uphold the ban. This does not guarantee that an athlete will receive a multi-year deal, but at least in this small way competition can work to ensure that the most meritorious will be able to bargain for better terms. Here clearly, as difficult as the NCAA cartel makes it for college athletes, their freedom of movement is several steps above that of chattel.

Although college athletes’ freedom of movement is less restricted than indentured servants’ freedom was, economically college athletes may fare worse than indentured servants. In both systems, the would-be employers provided room and board instead of paying the going rate for free laborers. Using Grubb’s figures, we calculate that due to economic competition, the master of an apprentice could expect to pay about 70% of what a comparable unskilled free laborer could command over the span of a 4-plus year indenture. If the indentured servant were skilled, the master might pay only 55% of a free artisan’s wage. Considering the risks the master took, for an indentured servant to give up 30%-45% of his earning potential was perhaps not too steep a price to pay given that he had no other means to pay his own way to the colonies, and the economic consensus is that the bargain a master received was comparable to the risks he undertook in committing to four or more years of food, housing, and training.

The situation is noticeably different (and worse) for our modern indentureds, the young and talented men who perform their craft on the gridiron or the hardwood, but lack the ability to negotiate a free market wage. College athletes are much closer in their economic situation to baseball players in the days of the Reserve Clause prior to free agency. Under the reserve clause system, a player was bound permanently to the team who signed him first. When a contract ran out, all Major League teams colluded, agreeing not to make an offer to another team’s player. In a very real sense, this put him in a state of permanent indenture — Curt Flood famously called himself a “well-paid slave” — and as a result teams could drive very hard salary bargains.

In a seminal work in sports economics, Gerald Sculley found that before free agency introduced a relatively free market for players, players earned approximately 20% of the rate that would prevail in a free market. But when a free market loomed, the presidents of the National and American Leagues, Chub Feeney and Joe Cronin, concluded that without the reserve clause, “Professional baseball would simply cease to exist.” Even George Steinbrenner famously said that “I am dead set against free agency. … It can ruin baseball.” Despite these dire predictions, 36 years after the end of the reserve clause, the demise of the multi-billion dollar baseball industry has yet to materialize.

At the schools in college sports’ six major conferences (the ACC, the Big East, the Big Ten, the Big Twelve, the SEC, and the Pac-12), the reported value of the athletic scholarship awarded to all football and men’s basketball athletes averages between 5-10% of each school’s football and basketball revenue, according to documents the (public) schools submit to the NCAA, gathered via Freedom of Information Act requests. For example, in the Atlantic Coast Conference (ACC), which lies in the heart of where the indenture system was most common in colonial America, its schools (only Clemson, Georgia Tech, Maryland, North Carolina State, Virginia, and Virginia Tech provided data) provide scholarships that the schools themselves valued (in 2009-10) at an average of $31,675 a year including the value of room and board. Although NCAA accounting suffers from flaws that tend to overstate the cost of an athletic scholarship, there is no denying that a scholarship covering approximately 90% of the full cost of attending an ACC school is certainly valuable, much as was passage across the Atlantic and four years of room and board to an eighteenth century stone mason in training. Even with the tendency for the accounting data to inflate these figures, total reported scholarship costs represent only 5.6% of our calculation of the football and basketball revenues of those ACC schools. The true value is likely lower.

What might these athletes earn under competition if the current agreement among all NCAA schools not to compete on economic terms were lifted? One analogy is baseball, where collusion held pay to one-fifth the market value of the players. If the same held true for college athletes, that 5.6% figure would rise to approximately 28% of revenue. In the ACC that would mean a package of benefits worth, on average, $158,000, of which the currently provided scholarship would comprise 20%. This is very consistent with other recent estimates of athlete value including work by Ramogi Huma and Ellen Staurowksy which pegged the average ACC athlete’s value at $158,466, and Jeff Phillips and Tyler Williams, who wrote in ESPN the Magazine that the average college football player was worth $137,000. Put differently, if the average ACC player is worth $158,000, that could mean the market rate for those one hundred athletes is about $125,000 per year higher than the current indentured value (that is the value of the scholarship alone).

One critical difference between college athletes and reserve era baseball players is Title IX. Though Title IX is often mischaracterized as making it illegal or impossible to pay male players, it is fairer to say that Title IX might dampen the economic benefits that flow to male football and basketball players in a competitive market. How much depends on a host of factors but under the set of assumptions that maximize the impact of Title IX, the law could potentially cut the competitive male rate in half, something closer to $62,500 rather than $125,000 per player per year.

Pac-12 figures are similar, with an average reported (public school) scholarship value of $32,732 in 2009-10 equal to 7.3% of the average Pac-12 revenues school’s football and basketball revenues. (All ten of the public schools in the Pac-12 provided data, including Colorado and Utah even though the data covers a year prior to their entry into the conference.) Thus, using the analogy to the reserve era in baseball, the estimated gap between the market rate for athletes and their current indentureship would be approximately $130,000 per athlete, with Title IX possibly reducing that by as much as 50%, to $65,000. Moreover, as conference realignment has allowed the major conferences to renegotiate lucrative television deals, the disparity between the revenue-per-athlete and the school’s cost for that college athlete will increase even further. The Pac-12’s new $3-billion dollar, 12-year deal with Fox and ESPN will grow each school’s average broadcast revenue by nearly $16 million. All else equal, this will increase the gap between the collusive terms the athletes are currently offered and the estimated market rate by approximately $25,000 per scholarship athlete in football and basketball after adjusting for Title IX. But as it stands, the athletes can expect more or less zero of that added revenue to reach them.

Although the lack of reliable data makes it difficult to determine the relative economic impact an indentured servant had on his master’s business, doing so for modern day college athletes in revenue producing sports is less complicated. In the absence of direct economic competition for athletes, schools compete for the best recruiters, i.e., coaches, as an indirect way of attracting talent. It is a general consensus in the economic literature, well stated by Prof. Andrew Zimbalist, that “coaches are paid for the value produced by others, most notably the athletes they recruit.” In 2009-10, the University of Texas valued the total grants-in-aid to football players at $3.1 million, less than half of the $6.5 million in total compensation earned by Texas’s head coach Mack Brown. An even greater disparity can be seen in the school’s men’s basketball program, with head coach Rick Barnes earning $3.9 million, 762% more than the entire value (approximately $460,000) placed on the scholarships of the athletes he coached. Of course, those numbers do not include the millions in salary paid to assistant coaches or the million dollar salary of Texas athletic director Deloss Dodds.

This phenomenon is not limited to Texas; Prof. Charles Clotfelter wrote in Big-Time Sports in American Universities that from 1986-2007, college head football coaches’ pay increased approximately 500 percent while head men’s basketball coaches pay grew at 400 percent – in contrast with tenured professors whose pay grew 30 percent during the same time period.

How does college coaches’ compensation (relative to their teams’ “payroll”) compare to that of coaches for professional sports franchises? During the same season that Brown and Barnes earned far more than their entire team, New England Patriots head coach Bill Belchick’s received approximately 7% ($7.5 million) of his team’s estimated $115 million payroll. Similarly, the Boston Celtics paid head coach Doc Rivers a comparable 7% ($5.5 million) of his team’s estimated $83 million payroll that year. The ability of NFL and NBA players to bargain via their unions ensures that the players in those leagues earn a fair share of the revenues they help to produce, and as a result NFL and NBA coaches earn their own competitive salary, but not the value that would otherwise flow to their players without a free market for their labor.

John Rose knew that Charleston was perfectly positioned to become a major player. The beautiful South Carolina weather coupled with an exciting city, almost unlimited resources and easy centralized access in the South would allow him to build a powerhouse. Rose knew that recruiting top talent would be the foundation for success, yet a once fertile talent pool had begun to dry up. His only solution was a major investment to build something so great that it would serve as a recruiting tool the likes of which rivals had never seen.

One could mistake John Rose for any major college athletics director today. Rose was not an AD, but rather a South Carolina businessman hoping to become a successful commodities trader. Using what money he had, he invested into the construction of the 180-ton merchant ship “Heart of Oak,” which would become one of the greatest commercial trading vessels built in North America since its colonization. The Heart of Oak was assembled at great cost and eventually valued at some £16,000, a fortune in the 18th century and worth more than a million dollars in today’s money. Knowing that continued profits from shipbuilding would require skilled labor at cheap costs, he traveled to England with his greatest recruiting tool, the Heart of Oak herself, to sell shipwrights on coming to work for him in Charleston as indentrued servants.

He failed.

By the late 18th century, the market for indentured servants had almost dried up south of the Chesapeake, due in large part to the proliferation of a far more sinister concept, slavery. Grubb argues that with cheap unskilled labor available cheaply via slavery and opportunities in Europe for skilled laborers growing more lucrative, most Europeans no longer were willing to offer sufficient years of servitude necessary to compete with slaves and cover the increasing costs of cross-Atlantic travel. Unlike college athletes, for whom choosing to forgo a scholarship to stay at home is often a guarantee of poverty (and for whom going to Europe is a rare exception – since 2007, only three highly ranked recruits have opted to play professional in Europe instead of accepting a college scholarship), 18th century European laborers had the real choice to stay home and continue to earn a living. Not even John Rose and the Heart of Oak could convince the shipwrights, carpenters, silk workers, and other skilled workers to come to America when faced with indentured terms set in competition with the price of acquiring, housing and feeding a slave.

As social commentators have grappled with proper analogies for the current collusive market for college athletes, they often reach for metaphors of slavery. Civil rights historian Taylor Branch famously wrote that the NCAA has “an unmistakable whiff of the plantation.” But while it is easy to see inequity in the level of control that a school exerts over its athletes and the unequal division of the value of their labor, the comparison to slavery breaks down because of the obvious and stark difference between athletes who choose to attend college (however onerous the terms) versus slaves brought involuntarily to this continent and coerced through violence and oppression into unwilling labor.

Acknowledging that college athletes are not enslaved by the NCAA is a far cry from concluding they are exercising free choice in an open market. Instead what they face is Hobson’s Choice – the offer of a monopolist cartel where the only choice is “whether you will have this or none.” Economic competition is the great protector of the disadvantaged, so powerful that it allowed the most vulnerable colonial laborers to preserve as much as 70% of their value, even under extreme conditions of economic hardship that led them to sell themselves into four years of bondage without control of their own movement.

Though not enslaved, college athletes have been denied access to a true market because of the NCAA’s nationwide agreement on maximum compensation to athletes. As the NCAA puts it, because “[i]n economic terms the supply-of-labor function is essentially limitless or unresponsive to price,” college athletes will “will always play sports regardless of compensation.” In other words, because college athletes face few other lucrative opportunities, as long as colleges collude to ensure their offers to athletes are not competitive, there is little risk of the athlete going elsewhere.

Left unsaid is what would happen if schools did not collude to fix prices, but instead had to compete for talent, much as farmers and merchants had to compete for the contracts of the indentured servants they sought to employ. As shown above, this collusion likely costs college football and basketball athletes tens or hundreds of thousands of dollar per year. And predictions that the sport is too fragile to survive the hurly burly of competition seem as likely to prove true as those who predicted baseball’s demise in the wake of free agency or of the supporter of the strict Olympic amateur code who in 1960 told Sports Illustrated’s Charles Thayer that “if we water down the rules now, …the Games will be destroyed within eight years.” Those predictions proved as true as those of U.S. Senator William Harper, who claimed that American civilization itself could not survive without slavery, arguing . “…the institution of slavery is a principal cause of civilization. … Without it, there can be no accumulation of property, no providence for the future, no tastes for comfort or elegancies, which are the characteristics and essentials of civilization.”

Who has benefited from an economic situation that makes indentured servants look relatively well off? That money has flowed to all of the people who provide the indirect tools schools use to compete for talent – to coaches, to administrators, to the construction firms that build the practice facilities and weight rooms used in recruiting – anywhere where there is economic competition for assets that help bring in talent. Ironically, all of these individuals have seen their compensation rise significantly over the last two decades because they have access to the system college athletes are denied, free-market capitalism. Because all other markets in college sports are competitive, those with the talent and work ethic are able to earn their worth, as well as some portion of the players’ value, while college athletes face indentures well below their market rate.

History teaches us many lessons. From the defense of slavery to the reserve clause to college sports, we have learned that the beneficiaries of unjust systems have great skill in developing rhetoric to defend their injustice. But as the history of indentured servants has shown, even in a system of short-term bondage, if there is economic competition, there is economic justice. In contrast, as the history of sports such as baseball and college athletics has shown, without economic competition, there is not.

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